Dollar remains the weakest one in Asian session today and selloff is picking up against Yen and Canadian Dollar. Nevertheless, there is no clear follow through decline against others so far. Technically, USD/JPY has resumed recent fall from 112.40 and is on track for 104.69 support. USD/CAD’s break of 1.3239 also resumes decline from 1.3564. 1.3068 support will be next target. Against Euro and Sterling, Dollar has yet to break near term structural support at 1.1347 and 1.2765 yet. Stocks were not too happy with the announcement, with DOW closed up only 0.15%.

Fed’s announcement overnight was clearly dovish, but not dovish enough to trigger a free fall in the greenback. In short, Fed dropped its “patient” stance and pledged it “will act “will act as appropriate” to incoming data. In the new economic median economic projections, Fed forecasts interest rates to be unchanged this year, followed by a cut in 2020, and then a hike in 2021.

Fed Chair Jerome Powell insisted in the post meeting press conference that ” the baseline outlook remains favorable”. He pointed that “Seven weeks ago we had a great jobs report and came out of the last meeting feeling that the economy and our policy was in a good place.” However, “news about trade has been an important driver of sentiment in the interim.” And, the question is whether these uncertainties will continue to weigh on the outlook and thus call for additional monetary policy accommodation”. He emphasized that “ultimately the question we are going to be asking ourselves is, ‘are these risks going to be continuing to weigh on the outlook?'”

Here are suggested readings on FOMC:

• FOMC Review – Divided Fed Signals Rate Cut This Year Still Likely
• Northern Exposure: FOMC Perceive Clear And Present Risk
• FOMC Review: Fed As Dovish It Could Be Without Cutting Rates Already
• FOMC Recap: Fed Doves Play Catchup With Markets
• FOMC Signals Rate Cuts Ahead
• Fed Keeps Rates Steady, But Majority of Members See Cuts ahead
• Fed Policymakers Losing Patience
• Fed Powell press conference live stream
• Dollar down but not out, Fed not patient but not impatient
• Fed forecasts rate cut in 2020, revised down inflation projections
• Fed keeps interest rate at 2.25-2.50%, no longer patient

Fed kept federal funds rate unchanged at 2.25-2.50% as widely expected. The most important change in the statement is dropping the language that “Committee will be patient as it determines what future adjustments”. Instead, the committee “will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.” Another important point to note is that Bullard dissented and wanted a cut.

On inflation, Fed acknowledged that “market-based measures of inflation compensation have declined”. Though, it maintained that “survey-based measures of longer-term inflation expectations are little changed.” On the positive side, Fed also said, “growth of household spending appears to have picked up”.

Full statement below.

Federal Reserve Issues FOMC Statement

Information received since the Federal Open Market Committee met in May indicates that the labor market remains strong and that economic activity is rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although growth of household spending appears to have picked up from earlier in the year, indicators of business fixed investment have been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation have declined; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes, but uncertainties about this outlook have increased. In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren. Voting against the action was James Bullard, who preferred at this meeting to lower the target range for the federal funds rate by 25 basis points.